When the word pension is mentioned, the images that most likely come to mind are those of our parents, grandparents or just old persons generally.
Millennials most of the time, do not see a need to have a retirement savings account, because well, they are quite young, just starting their career, they have a long life ahead of them and would rather use such funds for other more immediate purposes.
However, you don’t have to wait till you are middle aged to have a retirement savings account. It is not advisable to spend all your income now; you should plan for the future. Also, that you are self-employed does not mean that you shouldn’t have a retirement savings account.
Generally, if you are in paid employment, you would be required to open a retirement savings account because the law mandates it. If you don’t open one, the law also mandates that the employer ensures an account is opened for the employee.
The law requires than an employee remits 8% of his income, while the employer remits a minimum of 10%, making it a total of 18% of an employee’s income. These rates are the barest minimum and may be revised upwards, subject to the agreement between both parties. The employee can also choose to make voluntary contributions to his retirement savings account.
Payment of pensions do not apply only to the Public sector but also to the private sector. However not all employers remit the sum mandated by the Law, especially those in the private sector. So, because employees do not know their rights, they are deprived of their pension funds.
If you realise that you do not have a retirement savings account, then you should really have a discussion with your employer, especially when they are purportedly deducting pensions from your salary.
So, a holder of retirement savings account when he retires from work or attains the age of 50 whichever is later, is supposed to have access to his retirement savings account, he can withdraw a lump sum, but he cannot totally withdraw everything. You can also have access to your retirement savings account even before your retirement age if you are disengaged from employment or you voluntary retire. You may with the approval of the Pension Commission (Pencom) withdraw an amount not exceeding 25% of the amount credited to the retirement savings account.
In addition, in order to deal with inflation and/or the loss of value of funds, pension fund administrators are allowed to invest the retiree’s funds in fixed income securities, money market and corporate bonds.
Many millennials do not have a pension fund account. Below are the some of the reasons you should have a retirement savings account.
- Offers financial security after employment
- Steady income after retirement
- Retirees receives benefit as at when due.
- Pensions are also tax exempt
- Retirement savings accounts are managed by pension fund administrators who are regulated by the statutory established pension commission.
You can walk up to any Pension Fund Administrator to open up a Retirement savings account today.
By: Seun Adebisi